India's economy seen slowing rapidly in March quarter, with worse to come

Andrew Cummings
May 29, 2020

Ahead of the data release, the State Bank of India, country's largest state-owned commercial bank, forecast 1.2% growth in the country's gross domestic product for the quarter, while a Reuters poll of 52 economists predicted an expansion of 2.1%, on average, the weakest since comparable records began in early 2012.

Growth was 4.2% in the fiscal year through March 2020, the Ministry said, a performance that was in line with the median estimate in a Bloomberg survey of economists.

Consequently, India's FY20 GDP declined to 4.2 per cent from 6.1 per cent in FY19. While the GDP growth had been on a decline, even before the pandemic, it was further impacted by the lockdown due to the coronavirus at the end of March. In Q1 and Q2 of FY20, GDP growth was 5.1 per cent and 5.6 per cent, respectively.

The economic growth figures are one of the first major macro signs of the pain inflicted by the COVID-19 pandemic.

The eight core sectors had expanded by 5.2% in April 2019, the data released by the Commerce and Industry Ministry on Friday showed. This was a result of the COVID-induced lockdown, which led to coal, cement, steel, natural gas, refinery, crude oil, among other industries experiencing a substantial loss of production.

Multiple brokerages expect the GDP growth for the current financial year (FY21) to take a hit, and the economy to contract.

But the economy is expected to rebound to some extent in the third and fourth quarters, assuming the country manages to avoid a second wave of the virus.

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